TPA tax expert Małgorzata Dankowska about some of the most important tax highlights and updates for Poland in 2019.
Conditions for a Property Owner to Be Considered as Vat Taxpayer Due to Its Sale
In its ruling (ref. I SA/Bd 540/18), the Provincial Administrative Court declared that in order to be considered business activity in the field of property trade, such activity must be defined as professional, while actions carried out as its part must be performed in an organized an continuous fashion. Furthermore, the circumstances allowing to classify a particular activity as acting as a VAT taxpayer need to be investigated individually and with regard to a particular case. Another important criterion is whether the property owner took decisive and active actions in the field of property trade, including means similar to those used by traders, producers or service providers.
Individual Tax Ruling Does Not Eliminate the Risk of a Dispute with the Tax Authorities
In its ruling of January 28, 2019 (ref. II FSK 293/17), the Polish Supreme Administrative Court (NSA) confirmed, that in the case of a purchase of a property, neither capital ties nor events taking place after the purchase, which would confirm the fact of a purchase of an organized part of an enterprise, are to be taken into account. The case under consideration was of a company that, prior to purchasing a property, applied for an individual ruling with respect to the proper qualification of the transaction.
The tax authority ruled that the planned deal was not a purchase of an organized part of an enterprise and should be subject to VAT taxation and not the tax on civil law transactions. However, during a tax audit, the tax office determined that the company did not present a legitimate factual standing in its application, as it did not include, among others, capital ties with the seller, lease agreements and employees taken over; therefore, the individual tax ruling failed to provide any protection to the company. The NSA rejected the stance of the tax authorities and deemed undermining the previously issued individual ruling to be unacceptable. Moreover, it referred to the explanations issued by the Ministry of Finance in December 2018 regarding the VAT taxation of real estate transactions, where an analogous situation was quoted, which classified such a transaction as an asset deal and not a disposal of an organized part of an enterprise.
Only Structural Parts of a Solar Power Plant Are Subject to Taxation
According to the ruling of the Supreme Administrative Court (NSA) of December 18, 2018 (ref. no. II FSK 1275/18), only structural parts of a wind farm are subject to the real estate tax (RET). The case in question concerned a company involved in the construction of a photovoltaic farm, according to which the RET obligation applied only to the structural parts of the farm, namely the poles tied to the land. The Mayor and the Provincial Administrative Court in Szczecin questioned the company’s position and ruled that the entire farm, including other parts, constitute a separate entity from the technical and functional point of view and, as a non-building structure, should be subject to the RET.
However, according to the NSA, the catalogue of non-building structures provided for in the Construction Law is a closed list and it should be used to properly classify the asset as a non-building structure. The catalogue does not include other parts of the solar power plant, namely photovoltaic panels or cells; therefore, there is no obligation to pay RET in this regard.